10.23.2011

At General Electric, rising costs are helping drive a conversion to high-deductible plans, which tend to have lower premiums and may prod employees to seek out cheaper forms of health care. One plan, for instance, has a $1,600 annual deductible for a single person, along with premium contributions and annual caps on out-of-pocket payments that vary according to the employee's income.

All of the plans offered by GE are paired with accounts that workers can use to cover the cost of the deductible, either a health reimbursement account to which the company contributes, or a health savings account (HSA) to which the employee contributes. Both can accumulate money tax-free.

Next year, such plans will be the only option for the roughly 300,000 active employees and dependents who receive coverage from GE. "We needed to do this to remain competitive" by starting to rein in health-care costs, says Ginny Proestakes, director of health benefits at GE.

Smaller employers like Watauga County, N.C., are following suit. The county will put all of its 280 employees and retirees into high-deductible plans. The county has seen a falloff in revenue from sources such as sales taxes because of the slow economy, while health costs continue to mount. "It's fundamental economics," says Deron Geouque, county manager. "We can't continue to absorb those increases."

The transition to a high-deductible plan can be abrupt for people like Debbie Jankowski, 38 years old, a school counselor in Racine, Wis. When a new contract with the school district kicked in July 1, the deductible for her family of five went from zero to $4,000. The midyear changeover didn't allow a chance to add more money to her tax-free flexible spending account or start up an HSA, she says: "It was such a shock."